Ottawa is in the news and excitement is in the air as 2022 draws to a close. For those in commercial real estate, several new developments are in the works that could shape the market for years to come. From border expansions, increased immigration targets, and new business headquarters coming to town, Ottawa could be on the cusp of an economic boom that will reverberate through the region. In this post, we’ll take a look at a few developments taking the news by storm. But first, let’s examine some of the reasons why commercial real estate is different from residential.
Commercial Real Estate vs Residential
As the real estate market exploded from 2021 to early 2022, many investors scooped up residential properties to fix up or rent out. However, it’s surprising to many people that commercial real estate can offer higher returns than residential, with substantially lower risk. Commercial can entail everything from warehouse space, office space, retail storefronts, and service providers. However, there are some downsides you should be aware of.
- The barrier to entry is higher as more capital is required upfront.
- Between staff members and clients, more people will be visiting the property, and the risk of damage is greater. As a result, your insurance premiums will also be higher.
For many investors, the benefits far outweigh the risks. Finding a tenant can be easier, as many business owners prefer to lease rather than buy, allowing them more cash flow to grow their businesses. Investing in commercial real estate typically involves less interaction between land owner and tenant, with longer leases.
Look at it this way. Once a company is successful with an established clientele, they are far less likely to want to pack up and leave than a tenant renting a residential property.
New Developments in Ottawa That Will Impact Commercial Real Estate
Nokia Research and Development Facility
In October, Nokia Canada announced plans to create a new Kanata facility that will create over 300 jobs in the wireless industry. This project will transform Nokia’s 26-acre campus into a commercial and residential hub and forever change the economic landscape of this small Ottawa suburb. It will help to bolster the growing population and bring even more business development as people move to the area.
What This Means for Commercial Real Estate
Between 2023 and 2027, Nokia will invest approximately $340 million into developing its labs. In addition, they will receive an extra $70 million from the provincial and federal governments. Ultimately, the goal is to achieve a breakthrough in clean energy, smart cities, agriculture, and telemedicine.
One of the side effects of this expansion will be the countless small businesses attracted to the area as the population grows. Some of these entrepreneurs will want to buy property for their new ventures. However, many will choose to lease, especially when opening in Kanata for the first time.
As a commercial real estate investor, you can expect increased competition from professionals looking to lease a property.
City of Ottawa Border Expansion
In early November, the City of Ottawa finalized a border expansion plan. Now that the provincial housing minister has signed off, Ottawa’s urban border will expand on the east, west, and south. In addition, current height restrictions will expire, allowing for the construction of taller buildings.
What This Means for Commercial Real Estate
Though the plan is to address the residential supply, this border expansion also offers exciting implications for commercial real estate. The Greater Ottawa Home Builders’ Association (GOHBA) commented that the changes were “necessary and welcome moves to increase Ottawa’s housing supply.”
However, there is no residential expansion without commercial development to support it. The demand for new businesses like restaurants, grocery stores, and other retail stores will significantly increase. Opportunities will abound for both commercial and residential investors!
Canada’s New Immigration Policy
One of the biggest news stories of 2022 is the increased immigration targets. Over the last two years, companies have struggled to find and retain employees. This phenomenon has affected nearly every sector across the country as workers retired in droves during the pandemic.
One solution is to increase the number of immigrants, especially skilled workers, from other nations.
Canada’s latest policy seeks to increase our population by 1.2% over the next three years. We will welcome 465,000 new residents in 2023, 485,000 in 2024, and 500,000 in 2025. Many of these newcomers will settle in the Ottawa and surrounding areas, providing a much needed boost to our workforce and the economy.
What This Means for Commercial Real Estate
As always, whenever you increase the population, there is a greater need for businesses and services to support them. And many immigrants will be looking to set up shop themselves, making them ideal prospective tenants for commercial land owners.
Buying or Selling Commercial Real Estate
Some similarities exist between commercial and residential real estate, but there are also a few key differences.
- Buying a house can and should be an emotional experience because you’re going to live there for the next few years. However, there is no room for emotions when buying or selling commercial. The numbers either make sense or they don’t.
- The timeframe is longer. The typical residential transaction closes within a month or two. A commercial real estate deal can take months or even years to negotiate.
- There can be more legalities to navigate when buying or selling commercial property. For example, you have zoning laws to consider so you don’t accidentally buy a property you can’t build or expand on. You must also decide whether to act as a sole proprietor, partnership, or corporation, which further complicates the process.
- Commercial real estate usually involves higher dollar amounts than residential.
When investing, it’s highly recommended that you consult a commercial real estate agent to guide you through the complexities and help achieve the maximum profit and income from your investment.
